Company overview- Thermax Limited was incorporated in 1966 as Wanson India Pvt Ltd. in technical collaboration with Wanson, a Belgium company manufacturing coil type boilers. In the year 1975, Thermax started manufacture of water treatment plants. In 1976, it took over a small company manufacturing ion exchange resins, to compliment its water treatment activity. It forayed into air pollution control systems in 1979 and set up a heat recovery division in 1981.

The company intends consolidating its various divisions into two segments -energy and environment. In a bid to reduce its dependence on domestic business, given its cyclical nature, Thermax is focusing aggressively on exports and has set up subsidiaries for the same. In 2001, the company set up a 100% subsidiary in Mauritius. Further, it acquired ME Engineering, UK and set up Thermax Inc US to tap these lucrative markets. Its subsidiary, ME engineering would be sourcing manufacturing and engineering expertise from Thermax Energy Systems Division. The company has entered into a strategic alliance with Cummins Diesel Sales and Services (CDSS) for a joint marketing program to provide energy solutions to customers in various industry segments, based on Waste Heat Sources.

Products & Services-

Thermax has diversified interests, having presence in: Boilers& Heaters, Cogeneration, Absorption cooling, Chemicals and Water & Waste Water solutions. The process heat division comprising of boilers is the major contributor to revenues accounting for almost 28 % revenues. The energy division supplying turnkey cogeneration plants and captive power plants accounts for 14% of revenue. The absorption cooling division with 13% revenue share caters to the chillers market. It has two distinct segments - Industrial cooling and commercial cooling. Thermax is a leader in the domestic Vapour Absorption Machines segment with a 90% market share. The chemicals division accounts for 15% of revenues, waste & water division 19% of revenues and environment division 11% of revenues account for the rest of the business.

Thermax Babcock & Wilcox, the joint venture between Thermax Ltd and the US-based Babcock & Wilcox, is eyeing the co-generation and captive power plant market in India. Company is also looking at the renovation and modernization market for the existing power generation facilities. This market is likely to grow at a rapid pace with the Central government deciding to support the renovation and modernization of existing power plants through its Accelerated Power Development Program. Recent development-

Thermax and GE Water, USA, have signed agreements to expand the role that both companies will play in meeting India's growing water quality and availability challenges. Thermax is a leader in energy and environmental management, while GE Water is a leading global supplier of water and waste water treatment solutions. Under the first agreement, GE's ultra filtration and membrane bioreactor (MBR) technology will be utilized by Thermax for wastewater treatment, reuse and process water in India's commercial and institutional sectors. It is estimated that the need for advanced wastewater treatment for India's commercial and institutional sectors is expanding more than 50% per year.

This demand is driven by new regulations related to recycling of wastewater. As this technology application is in its infancy, there is also a huge potential for the use of MBR in treating municipal wastewater for recycling, reuse and discharge. Today, India treats less than 15% of its wastewater before it is discharged into precious water resources. Through this agreement with GE, a world-class technology provider, Thermax can now provide customers with a reliable and efficient water reuse system that is well suited for decentralized wastewater treatment and reuse. Thermax will offer its customers in India GE's MBR technology that features the latest advances in the field of wastewater treatment. GE Water is a global leader in hollow fiber ZeeWeed membrane technology, which is used to manufacture ultra filtration and MBR products.

At current market price, stock is trading at 16.74 P/E multiple of its FY2010 estimated earnings. We recommend investors to buy "Thermax Ltd" with medium to long-term investment horizon.